Is There Now An Opportunity In Eagers Automotive Limited (ASX:APE)?

Eagers Automotive Limited (ASX:APE), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$12.88 at one point, and dropping to the lows of AU$10.71. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Eagers Automotive's current trading price of AU$11.26 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Eagers Automotive’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Eagers Automotive

What Is Eagers Automotive Worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.0% below my intrinsic value, which means if you buy Eagers Automotive today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth A$12.38, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Eagers Automotive’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Eagers Automotive?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Eagers Automotive, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? APE seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on APE for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on APE should the price fluctuate below its true value.

If you want to dive deeper into Eagers Automotive, you'd also look into what risks it is currently facing. To help with this, we've discovered 3 warning signs (1 is a bit concerning!) that you ought to be aware of before buying any shares in Eagers Automotive.

If you are no longer interested in Eagers Automotive, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.